A Financial Case for Leadership Development

Author: Martha Rice

In the competitive world of business, companies may decide to forgo leadership training in order to cut costs. However, a high-quality Leadership Development course can save six figures off a company's bottom line each year. Not only does a company need to vie for its share of today's market to keep itself profitable and successful, but it must also compete to keep its biggest investment, its employees.

In a recent Bureau of Labor Statistics Report, the United States Department of Labor stated that the median tenure of employees ages 25 to 34 was 2.9 years. They also reported that management and professional occupations, with the highest median tenure among major occupational groups, was only 5.0 years. Consider then, the cost of employee turnover.

A company should calculate the replacement of an employee at 150% of the employee's annual total compensation figure, and 250% if the employee is in a managerial or sales position. This figure includes lost productivity, training, recruitment, temporary replacements, either through hiring temporary staff or overtime incurred by other employees, and the actual cost of an employee leaving. Simply put, if your company's average employee compensation package is $50,000 then the average cost for the loss of an employee is approximately $75,000. Consider also that if your company maintains a workforce of 1000 people and a yearly turnover rate of 7%, then your annual turnover expenditure will be approximately $525,000 a year. Over a period of 5 years, this figure can easily top two and half million. (To see a break down of costs see our employee turnover .) Wouldn't companies be better off using this money in developing leadership and innovative ideas to stay ahead of the competition? The answer will be a resounding yes.

So how does a company keep its quality employees?

A first step would be to discover what an employee feels is important in his or her job. CMOE surveyed 327 employees about their supervisors (117) before these supervisors attended a Leadership Development Course. The survey asked employees to give their opinions about what their supervisors were doing right; and in what areas could their supervisors improve. Twelve companies and agencies participated in these survey evaluations, representing the fields of banking, education, government, manufacturing, and sales. The data showed that employees want to be engaged, trusted, and responsible for their contributions. They also want to share in the emotional benefits of being linked with a growing and successful business. Good leadership is the key to fulfilling these employee needs.

Another step is to put in place a team of leaders who have the skills to inspire a commitment from their employees to accept responsibility for and have a vested interest in their company and co-workers. Unfortunately, too many managers have knowledge about good leadership skills and still do not understand how to put this knowledge to work in the most effective manner. Training professionals can help these managers develop their knowledge into successful skills. An experienced leadership training company can also help companies develop an effective Leadership Development Course specific to a company's needs. The result will add dollars to the bottom line by keeping valuable employees, increasing productivity, and creating an environment conducive to innovation that will keep the business ahead of its competition.

The Center for Management and Organization Effectiveness can help you develop effective leaders through our Leadership Development Courses such as: Applied Strategic Thinking, Coaching Skills, Team Building, and Transition into Leadership.

About the author: Martha Rice is a design team leader for the Center for Management and Organization Effectiveness . She has degrees in both English and Communication and has over twenty five years experience in administration.

If you would like to learn more about any of these or other Leadership Development Courses, please contact a represent